Project Procurement Assignment: Case Analysis of East West Link (EWL) Project
Task: You are required to undertake an article by De Martinis and Moyan, 2017 on “The East West Link PPP Project’s Failure to Launch: When One Crash-Through Approach is Not enough*” and write a detailed report on project procurement assignment considering the special issue of infrastructure Public-Private Partnership.
There are various procurement methods and objectives that can be associated with a project and those method can decide the success and the failure of the project. In this current context, the case study has been provided based upon the East West Link (EWL) project which was a public private partnership project or PPP and the objective of the project was to construct a road that will be helping in linking the east and the west of Melbourne and the road was supposed to be 18 kilometre long (youtube.com, 2020). This project is a proper example of ‘crush through approach’ as traditional government had a voice over it and contracts were signed and then again terminated by different governments. It was a long term project and the first government was associated with the crash through of the infrastructure plans that this project was holding. After that when a new government was elected, the project was cost $1.1 billion as government argued that, there has to be a democratic mandate associated with the project.
Project procurement routes
For this particular project of East West Link (EWL) construction in Sydney, Australia, the selected procurement route was PPP or Public Private Partnership. This is a kind of partnership which is very broad in nature and in this kind of procurements, the public sector and the private sector collaborates based on a few benefits that are mutual for both of them. PPP is a well-known way for delivering a range of policies for the partnerships and it is associated with creating a partnership that helps in providing the various services, associated with building and infrastructure, and even caters to the hospital for maintenance as well (Gordon, 2020). As sometimes the public sector is able to provide some services that are not possible for the private sector to execute without any proper support from the background and that is the core area from where the PPP projects start from. East west link of Melbourne was one of them and it was considered as a PPP because it collaborated with governmental association because for constructing roads, the company has to get the permission from the government and as it was for the public cause, PPP as a procurement was selected for this project.
Project limitations and challenges
There were various areas of limitations and challenges in this project of East West Link, Melbourne, Australia and those limitations and the challenges occurred as the project managers did not focus on completing the project tasks and that is why this project faced a lot of challenges and in the case study the evidences have been provided. The evidences say that this project did not adhere the scoping services that were adequate with the project scope and that led to limitations in the case of the business and it was seen that there was no prioritising of the eastern base over any other section of the road that was to be constructed (theguardian.com, 2020). Another limitation and challenge of this particular project was that it did not choose PPP properly for carrying out the project and that led up to the undue weight interest of the government for staring this project before the year 2014 as there was some state election that was about to take place in the year 2014. It was seen that the money that was worth for it could not be achieved with the plan of PPP procurement. There was another limitation as the arrangements that were made for the agencies in terms of tracking the cost of the project East West Link failed because of no proper monitoring and reporting which was more than necessary for a high budget project like East West Link.
Project main failure reasons
The project of East West Link Sydney, Melbourne failed for various reasons and it can be said that nature of this particular PPP was a bit tangled which is no very usual for the PPP procurements and this kind of situations can lead up a project to its failure and East West Link is one of the particular example in this case. There are a few major reasons that pushed this project towards failure and eventually towards declining. The first and ore reason behind failure of this project was, it failed to provide the government of Australia for a valid reason to invest in the project. The project was to create an 18km long freeway from Eastern Freeway at Hoddle Street to Western Ring Road at Shining West. This project was also meant to improve the traffic services by reducing the traffic congestion and it was projected that this project of East West link will go on from the year 2014 to 2019 and it will also provide employment to more than 32 hundred people. Even though it sounded to be a very good plan, the PPP did not work out as the government stopped funding the project (Abc.net.au, 2020). The pay out of this project was very less and it was hard to get the investment based upon that pay out. It was also seen that there was a cost ratio of 0.45 in this project and that was very less and after spending more than $10 billion again losing $5.5 billion does not make any sense. As this project eventually stopped getting the investment it was drawn towards decline and these reasons are justified because government would not spend the funding on a project where they cannot see the potential initially. These are the reasons that pushed East West Link project, Melbourne, Australia towards the decline and eventually that project was forced to be stopped.
Justification for selecting the particular procurement route
The project of East West Link would have been the fifth PPP project that failed in terms of construction in Australia and it happened because at first it was seemed that choosing PPP as a procurement route could have been a beneficial opportunity for the company but eventually it turned out that PPP was not justifiable for this particular East West Project and there are various disadvantages of PPP procurement route and by analysing them it can be evaluated why choosing PPP as a procurement route was not justifiable in terms of this East West Link project. PPP projects are usually a long term agreement and the infrastructure has to be made properly. These project are usually not that simple and they do not acquire the flexibility like the other projects because in some cases it is not even possible to create a proper evaluation for all the events that are influencing the project at present and also affecting the future aspects of the project (Abc.net.au, 2020). In the case of East West Link project there was no proper infrastructure found that could look investment worthy to the government and as in terms of PPP project the public sectors is one of the major investor, it is impossible to execute a project if that support is not there. The infrastructure of the PPP projects are usually very much expensive and East West Link project was not an exception and as there was no proper evaluation regarding the return form the project as the project cost ratio was very low, it can be said that this project failed to match the standards and the requirements of PPP projects. As it is a disadvantage of PPP that, there are various payment obligations that exists in the PPP project public sector and that can leave a negative impact upon the fiscal indicators of a public sector and in terms of this particular project, it was not evident that the project managers kept that in mind before choosing PPP as a procurement route (Abc.net.au, 2020). This project was itself very costly and expensive, and as the service procurements processes of the PPP projects are longer and more costly than other procurement routes, it had to be considered by the project manager and the team before creating this PPP agreement and as there is again no evidence of such process, PPP as a procurement plan for this project cannot be justifiable.
Advantages and disadvantages of the current procurement route
There are various advantages and disadvantages of this particular procurement route which is known as PPP or Public Private Partnership however, even after providing lots of advantages, this procurement route is not suitable for all kinds of projects like the East West Link, Melbourne, Australia. The advantages and disadvantages of this procurement route can be discussed here.
The advantages of this procurement route includes various areas such as, the main aspect of this PPP partnership projects is ensuring the investment that is required form the public sector and the proper management of the public sector resources. This is one of the biggest aspects because PPP projects are created mostly based on the required investments and it is much important that the resources that are being provided by the public sector is well organised and put to their optimum usage (greens.org.au, 2020). The PPP partnership ensures that there is a high quality in the provision of time that are related to the public services because maintaining the proper time is also a major aspect in this context. There is an opportunity of getting long term remuneration that can be granted by the private entity of the public private partnership. It is always beneficial to have a long term plan in terms of the remuneration and as an advantage of this procurement route, the private sector provides with this. Another advantage of this process is, all the expertise and experience from both the respective sectors can be utilised and used in an optimum way.
The disadvantages of this PPP include various aspects as well as all the PPP projects are usually long term agreement and a long term process that includes various area of complexities and various area of inflexibilities as well (greens.org.au, 2020). Moreover, all the PPP project are very costly and creating the infrastructure for delivering the service is expensive as well. It also requires a lot of time to create the proper infrastructure and also evaluating all the events that are going on and might affect the future aspects of the project itself. The remuneration from the public sector might affect the fiscal indicators and that is another area of disadvantage that PPP holds.
Justification for considering alternate procurement routes for the project
There are various procurement routes and for executing the project of East West Link particularly PPP was chosen however this project failed and now it can be assessed why there was the need for considering an alternate procurement plan for the project. The procurement routes include some common routes that are usually done in traditional, integrated or packaged way and then there are some less common procurement plans that include collaborative ways like PPP, design designing and so on. From all these available procurement plans the project team of East West Link needed to choose one so that they could use that route as a backup option for executing the project and if they has done it then they could have given this project another try with the available resources so that the project could have another chance to be executed (themandarin.com.au, 2020). They needed to consider an alternate procurement route for some other reasons as well. PPP is one of the most expensive and costly route of procurement and it could have been beneficial for them if they had chosen an alternate procurement route which is less expensive and carries less risk factors. The project East West Link did not have a proper infrastructure which is required for PPP and as they were approaching this procurement route without any plan then, it would have been beneficial for them if they had chosen another procurement route for backup. Another reason for choosing an alternative procurement route for the project includes the factor of investment (themandarin.com.au, 2020). In PPP there is usually a high involvement of the concerned government sector and the project has to be robust and convincing for getting the investment and that is the only way but if there is an alternate procurement plan then there would be chance to manage the investment in a proper way which is much required in the projects.
Risks associated with this selected rout. Provide evidences from within the case study on how these risks were of great concerns
Project risks mainly occur when the required deliverables are missed due to expected as well as unexpected events and these events are termed as risks associated with the project. Every project manager identifies all associated risks of project and thereby, prepares an alternative plan to mitigate the risk or lower the impact of that particular risk on project deliverables. Following are few risks associated with the selected procurement route as per case study of EWL project:
Scope risks is considered as a complete diversion from the goals and objective of the project. In most cases, scope risks are managed and controlled by the project manager and in case if this risks does not get mitigated then it leads the project to divert from its required deliverables. In this project of East West Link Project, there were no appropriate planning to attain the required objectives of the project (audit.vic.gov.au, 2020). As stated in this case study, in the beginning of the project huge budget was determined but the actual budget exceeded and then, a newly elected government completely denied to support the project due to number of controversies.
Budget risk is one of the most common risks that appears to be a big threat to business individuals. It becomes very difficult most of the time for project owners to have a sufficient profit from their client’s projects and keep their project client’s satisfied. This risk is mitigated and resolved by the project owner by reducing the unnecessary tasks and reducing wastage of time for required for the project. In order to mitigate this issue, project managers keep a proper tracking for tasks scheduled and flow of resources each day. In this project of EWL, the team was relaxed after identifying the long duration of the project due to which the budget was not predicted appropriately and therefore, after election the project was been stopped by the government due to excessive flow of budget (audit.vic.gov.au, 2020). The contract was failed as the funding to this project stopped after election as per newly elected government.
Scheduling the tasks of any project is the key term to attain the required target within provided time period. If tasks of any project is not scheduled then most probably it fails to attain the required goal of the project. Nowadays, individuals are so inclined towards their work that they divide their work into tasks and target to complete each task within determined period of time. In completing any project, it is very important to complete each task of the project as per planned as there might be any unwanted issue which can caused delay to the project and thereby, result in missing the determined deadline. In this project of EWL, the deadline was of years and so the importance of work schedule on daily basis decreased. This resulted in increment of the overall determined budget.
Governance risks involves the implementation or adoption of strategies and tactics used by the project owner to attain the project goals and objectives. Governance risks can be controlled by the project manager by monitoring and reviewing the strategies that can lead the team to attain project goals and objectives (audit.vic.gov.au, 2020). In this case study of EWL project, both private and public sector were associated with it. However, due to inappropriate managing of team and resources the overall determined budget exceeded and later on resulted in rising of many controversies after the election of new government.
What other procurement routes should have been investigated/considered for this case and why?
The selection of procurement route was completely under hands of the government as they had a chance to take the most important decisions. The other procurement routes that could be considered or investigated for this EWL project case study are as follows:
Proper choice of PPP as a procurement option
The East West Line project was involved with the private sector who would provide an infrastructure for public through financing or investment (investopedia.com, 2020). This determines that as per National PPP Guidelines, the procurement options analysis document was to be evaluated by a procuring agency and consider it as a potential procurement method. VAGO had advised the government to not to provide a tight deadline for EWL project as it might result to occurrence of risks involved in the project.
Appropriate use of PSC (Public Sector Comparator)
PSC helps the government to assess the value for money by accepting the proposal by a private sector in order to deliver the public sector product (investopedia.com, 2020). This consist of quantitative components in terms of NPC (Net Present Cost) from the base cost that government is producing to deliver the project. This PSC amount is compared with the proposal amount of PPP, which consists quarterly service payments, state or federal contributions and the retained risks. The PPP procurement method is considered to deliver value for money when the PPP proposal amount is less than the PSC amount. It can be said that by delivering the EWL project via procurement method, it is more likely that the project would not have delivered any value for money.
PPP delivery Mechanism and Opposition’s role
As stated in the article of EWL project, it is determined that the proper choice of PPP as an option of procurement had spill over impacts on consequent requirements. The main reason behind the opposition’s intent to terminate this project was that there were unresolved issues before signing the contract and the non-standard provisions.
Discuss two other possible routes and provide why it was possible to consider them.
According to the case scenario, the PPP delivery mechanism had just started with EWL project and the questions from the opposition started and sooner, it became their point of policy which would be implemented if they win. In September 2014, the opposition announced that as per legal advice they would never allow the project of EWL Following are the two other possible routes which would be considered to get the EWL project completed:
- Unresolved issues prior signing the contract
The government should have focussed on resolving all the internal issues related to the success of project EWL and then move ahead as per majority decisions. This would have resulted in an appropriate decision making and the time period provided to complete the project would have been increased.
- Non-standard contract provisions
A non-standard contract includes products and services that never requires any approval from the Economic Regulation Authority. These type of contracts has various terminologies like, variations in price, charges, fees, contract duration, and early termination fees.
Supporting evidences from the article
This respective study is highly focused towards different procurement methods which would be related to success or failure of a project. Thus, in accordance with the case study, it has been observed that EWL project is a PPP project which contributed towards construction of roads by adopting traditional approach. Focusing on the stated article, it can be put forth that the Australian’ long infrastructure history has been a failure in launching the EWL road project. From this it can be evident that the collaboration of public and private partnership supports a better range of various services which would be effective for supporting the infrastructure of the public-private projects for benefits (De Martinis and Moyan, 2017). However, there have been different challenges and limitations related to the EWL project, these issues have been prevalent due to the project managers who have not properly focused towards the completion of the project activities. Such inattentiveness might impact troubles and issues related to undertaking of the project activities as well. As per my opinion, the reasons for failure of the project have been many reasons, like; the project was a failure to explain to the government the reasons to invest in the project. Thus, this has resulted in a financial crisis of the project. Moreover, the payout of this project was also very less as there was a lack of proper financial resources. This highly impacted the flow of work in this project due to lack of morale and motivation of the workers. The cost of this project was also very less and the loss was greater as compared to the profit earned which comes to make no sense. Thus, this affected the route of income of the project which ultimately resulted in the deterioration of the project. This point can be valid of the argument presented (Berezinet al., 2018).
Analyse the ethical aspects of the East West link project and whether you agree/disagree with the project
Focusing on the lack of proper ethical aspects has resulted in the failure of the project. In order to highlight the ethical aspects, it is important to shade light on the issues which have been encountered by the concerned project. Most importantly, the failure of the project in convincing the government to invest in the project has deteriorated the value of the project and its activities. The procurement route chosen by EWL was also not justified; there were issues in infrastructure, payout structure and flexibility which must be present in case of projects. Above all factors, this PPP project was expensive, where the government was considered as the major inventor which was not possible. Moreover, the investment done for the project is not much equivalent to the profit generated, there was an improper ratio between these two aspects. Additionally, this project also fairness, responsibility and honesty and this can be explained by considering the factor of low payout to the workers who majority put their efforts to earn. The workers associated with the project were not able to earn a proper amount, as they were under-piad which hampered their morale and motivation to work their level best. Through this, it can be stated that the project hampered its reputation through these factors (Tariq and Zhang, 2020).
Highlight the ethical challenges in the project based on your review
Focusing on the ethical challenges of the project, it is important to focus on that this project was a long-term agreement which gave rise to other inflexibilities which has negatively impacted the infrastructure and all the events which might have developed into a project in the future. This project has also been involved in several controversies which are associated with the infrastructure story of the project which is a combination of past and on-going media coverage. Among all the identified controversies and issues, the most significant controversy has been Commonwealth and Victoria Auditors General where there were issues regarding government arrangements for accounting treatment and wealth funding and related sources. In addition to this, there were other unplanned and unresolved issues which were persistent from the signing of the contract itself. This has resulted in a non-standardized contract which has impacted the project in terms of financial resources (Pittman and Day, 2019). Controversies in relation to media and political parties are prevalent which affected the private funding and the elections of federal and states. “Lack of proper accountability and process, inadequate scoping of services, issues in procurement option, project governance, development and use of Public Sector Comparator, lack of clarity in rate of methodology, inconsistencies and controversies” collectively are responsible for affecting the ethicality of the stated project. Sheer focus on the business case was required to be provided by the stated project in order to eradicate the persistent ethical issues. For better performance, the project would have focused towards economic benefits and prioritizing the project stages which would have helped them to manage the project activities and eradicate the issues which are prevalent.
If you were the contractor, would you accept the offer, will you negotiate more? Explain
Taking into account my opinion, I would have highly focused towards integrating the different steps of project management which would help me gain an idea regarding the stages involved and the breakdown of the activities of a project. Moreover, ethical practices would be my prime focus which would be related to infrastructure and payout of the workers who have been working immensely. Maintaining ethics for a project would help in success of a project.
From your own perspective, what could be a good procurement contract for this project? Why would you recommend this contract? Discuss the advantages and disadvantages considering the project requirements? In project management, having a procurement professionals is very important, as it results in application of current and required type of procurement contract based on project goals and objectives. All type of procurements have both benefits and drawbacks and the procurement professionals have idea as well as experience to know which type of contract to use and when to use.
According to me, as per provide case scenario of EWL project Fixed Price Contract would be the most appropriate. This will simply enable the private organization to focus on the required target of the project EWL and maintain a low cost while completing the project. I would like to recommend this contract as this contract could be feasible for long duration as per EWL project requirements and the overall budget required would be low as the scope would be clearly specified. Following are the advantages and disadvantages of this Fixed Price Contract:
- After signing the contract, it cannot be backed off as it was done in the provided case scenario. In this contract both parties are liable to perform their respective functions as per discussed in the contract, which ensures both parties to get the project completed timely manner.
- Controlling the price for the project becomes easier as all kinds of guesswork is removed and this is one of the great relief as per this case scenario of EWL project.
- The risks associated with the project is easily identified due to clear vision of scope and therefore, mitigation strategies are also easily developed.
- The scope of project EWL should be determined clearly while signing the contract or else any missing portion can end to increase in overall required cost for the project.
- Any change in scope of contract can directly impact the overall project duration and budget and in this case scenario, oppositions can easily create a problem based on it. ?
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